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(Sharecast News) - BlackRock Throgmorton Trust reported a modest increase in net asset value over the year ended 30 November on Monday, underperforming its benchmark, as it progressed a proposed combination with the BlackRock Smaller Companies Trust, expected to complete in April.
Net assets fell to 501.6m from 595.9m a year earlier, while net asset value per share rose 0.7% on a total return basis, compared with a 10.1% return from the benchmark Deutsche Numis Smaller Companies plus AIM excluding Investment Companies Index.
The FTSE 250 firm said its share price delivered a total return of 6.5%.
Over 10 years, NAV and share price total returns were 105.1% and 119.8% respectively, ahead of the benchmark's 59.6%.
The shares ended the year at 612p, representing an 8.5% discount to cum-income NAV, compared with a 13.2% discount a year earlier.
During the year the trust bought back 12.2 million shares for 70.8m at an average discount of 10.5%, which the board said was accretive to NAV.
Revenue return per share fell 4.6% to 17.7p, reflecting lower portfolio dividends and reduced income from derivatives.
The board declared a second interim dividend of 15.2p, taking the total dividend for the year to 19p, up 5.6% on 2024.
A pre-liquidation dividend of 5.5p per share was also declared, payable on 2 April, in connection with the proposed combination.
Chairman James Will said that over the year "the company's NAV per share increased by 0.7% and the share price increased by 6.5%, underperforming the benchmark return of 10.1%," adding that while the portfolio delivered a modest absolute gain, "the underperformance compared with our benchmark was disappointing."
The trust announced in February that it had agreed, subject to shareholder approval, a proposed combination with BlackRock Smaller Companies Trust that would create an enlarged vehicle with net assets of around 780m.
Shareholders would be offered a cash exit at close to NAV for up to 38% of issued share capital, while continuing investors would benefit from reduced management fees and an expected ongoing charges ratio of 0.63%.
Will said the board believed "the combination strongly positions the enlarged BRSC to capitalise on any change in sentiment towards UK smaller companies," citing improved scale, liquidity and cost efficiencies.
In his investment report, portfolio manager Dan Whitestone described the year as "probably the most challenging one of my career," citing geopolitical tensions, UK fiscal uncertainty and sustained outflows from small and mid-cap equities.
He noted that 100% of the benchmark's return over the year was generated by 30 shares and that 60% of companies in the index underperformed.
Despite the relative underperformance, Whitestone said many holdings had delivered positive earnings revisions and that the portfolio remained focused on quality growth businesses.
He added that UK small and mid-caps offered "compelling value" over the long term, although near-term catalysts remained limited amid continued outflows from the asset class.
Since the year end to 25 February, the trust's NAV had risen 7.5%, compared with a 5.7% increase in the benchmark.
At 1128 GMT, shares in BlackRock Throgmorton Trust were down 0.78% at 638p.
Reporting by Josh White for Sharecast.com.